Mortgage chat transcript

John O'Hara, who manages operations in the residential lending market at Sherwood Mortgage Group, chatted with readers on Monday, April 14, about navigating the mortgage maze.

Read John O'Hara's bio

Bostondotcom: Welcome, John. Take it away.

John O'Hara: Thanks! Glad to be here to answer your questions.

~TW: I'm confused about mortgage rates advertised at banks in different states. My mortgage company will only qualify me for mortgages from Mass. banks, but if I can get a better APR at an out of state bank, why can't I apply for a mortgage with one of those instead and save on my interest?

John O'Hara: Each state has different regulations and closing fees that affect the APR. By working with a Mass. lender, your interest are better protected and may cost you less in the long run.

DanD: Hi John. I have a jumbo mortgage and I heard that the government was making a one time exception to push the jumbo mortgage limit to $750K. Since I will be able to take advantage of that relief what kind of "relief" should I expect?

John O'Hara: You are correct in that the conforming limit was increased. However, the new limit is determined by the county you are located in.

John O'Hara: Within Mass, the highest limit is $523K, other than Nantucket and Martha's Vineyard. So depending on the county you are in, it may not benefit you.

chins: Hi John. I have excellent credit (over 720 fico) and a one year old mortgage at 5.875 (3o yr. fixed). Is it time to shop for a lowered rate now, considering the multiple rate cuts? thanks

John O'Hara: Given that the current 30 year fixed conforming rate is at about 5.875%, refinancing now would not benefit you. Mortgage rates are not tied to the Fed Prime rate so we have not seen a corresponding mortgage rate drop.

boston: How quickly can a mortgage typically be closed?

John O'Hara: Typically, we now need about 30 to 45 days from the application to the closing date.

nervousseller: Does it make sense to get an ARM versus fixed in this economy?

John O'Hara: Good question! The trend lately is that the rates on adjustable rate mortgages are very similar to rate on a 30 year fixed. That being the case, I would recommend a 30 year fixed.

AM: Hi, John can you or should buy a house with 5 or 10 % down? Or is 20% the norm now?

John O'Hara: You can still purchase a home with as little as 3 percent down! There are many good programs available from FHA to first time home buyer programs.

bm18: Hello, are there any lenders out there that would be willing to do a refi on a No Doc, 30 year fixed on a two family duplex-rental property?

John O'Hara: "No Doc" products are generally no longer available with all the recent credit market changes.

helpFICO: What is a NORMAL credit score these days.

John O'Hara: Average credit score today is about 680.

former_lender: Is 100% financing still available to the most qualified borrowers for their primary residence?

John O'Hara: 100% financing is available, but very limited at this time.

DanD: OK, then let's say that I do qualify, what are the differences in rates between a jumbo and non-jumbo. Are they substantial?

John O'Hara: Historically, the difference was about .375%. Recent credit changes has significantly widen the gap. Current conforming 30 year fixed is at about 5.875%. Jumbo 30 year fixed is now at about 7.75%!

Tim: John, what is the likelihood that that MIP Tax deduction for loans taken '08 will get thru Congress? And how come it is only for loans closed during that specific year ('07 and maybe '08)?

John O'Hara: During 2007, Mortgage insurance premiums were tax dedutable on a trial basis. In January, it was extended through 2010.

JO: Hi John, I am looking at investment property do you know of any mortage companies that do not require 20% down?

John O'Hara: There are still products that allow for 10% down on an investment property.

yo_eddy: Do you recommend locking in the interest rate that the bank is offering you now, or just continue to wait and see what happens?

John O'Hara: This is always a tough decision. Rates have been changing quickly lately. So my recommendation is to lock in if you are happy with the rate and the monthly payment. It protects you against significant market changes in the future!

Tomj: 3 years ago my wife and I took out a 80/20 mortgage on our 335k house, with 0 down. The 80 mortgage is 6% the 20 is 8.75%. I'd like to refinance and combine them and have 1 15yr mortgage. If I can get a decent rate on a 15 year, my payments would be comparable to what I am paying now. Does this sound like something that is doable or do you think I may not have enough equity in my house to refi?

John O'Hara: The first question is whether your home has appreciated enough to where your current first and second mortgage balance would put your loan to value at 80%.

John O'Hara: Assumming that is the case, the current 15 year fixed rate is not significantly less than 6%. So, I think you will find that the payment on the 15 year fixed is a good amount higher than your current payment.

adm: We're first time home buyers. How long/how many places should we look around for a mortgage. if we look for a while, will this impact our credit score (ie multiple reports being pulled, etc)?

John O'Hara: I think the first step you should take is to find the right mortgage professional for you. The best way to do this is to seek out recommendations to family and friends. Make calls to these referrals and find someone you are comfortable with.

John O'Hara: If you do have many credit pulls, it will start to negatively affect your score. So, find someone trust!

helpFICO: If someone has a score below 680 - are they typically declined for a mortgage?

John O'Hara: When deteriming mortgage eligibility, credit is one factor of many. A 680 credit score is not a reason alone for being declined, since is considered to be an average credit score.

jim: Following on the investment property theme, with so-so credit, what are the prospects of putting 50%-60% down, will the strength of a lot down help a substandard credit score?

John O'Hara: When you are qualifying for a mortgage, credit score is one factor. With a 50% to 60% down payment, that is a strong compensating factor that may offset a marginal credit score.

Tim: John, I always felt that the mortgage rates "mirrored" the 10-year Tnote, yet even that seems not to be true recently. So... what should we be looking at?

John O'Hara: You should be looking at sales of mortgage backed securities! Mortgage rates are not tied to the 10 year t-bill or the Fed Prime rate.

STawde: Hi John. I am thinking of renting my current home and buying another. What are the mortgage rates like for second homes?

John O'Hara: Rates on mortgages for second homes are generally the same as rates on primary residence mortgages assuming you meet the program qualifications.

Billy: Are lenders still willing to lend 90-95% of purchase price considering real esttae value will drop 20-30% over the next 18-24 months?

John O'Hara: Yes, financing is available with 5 to 10% down. There are programs that still allow a 3% down payment. It is hard to speculate on the future of real estate values over the next 18 to 24 months.

franktank: Hi John - we're first time buyers and plan to purchas a home by December 2008. We have about 50K in savings for a home and wonder if putting down less than 20% would be a huge mistake?

John O'Hara: Absolutely not! Many buyers these days are purchasing homes with less than 20% down. You just need to be comfortable with the total monthly payment.

franktank: If my spouse has a low/average credit score and i have an excellent score would his low score out weigh and we'd be rejected?

John O'Hara: When qualifying for a mortgage, credit score is one part of the total package. Generally, if your credit score is very good and all other factors from income to down payment are strong, it will probably out weigh an average credit score.

mike_2: John, what programs allow for 3% down and how do these differ from standard programs? I am a first time buyer.

John O'Hara: The best program right now for 3% down is an FHA program. These programs provide very competitive rates and reduced mortgage insurance premiums.

jane: Hi John, we have a 5/1 ARM and the 5 yrs is up next August (of 2009). In your opinion, should we be looking to refinance now, or ride it out a bit?

John O'Hara: It would depend on what rate you have currently. 30 year conforming fixed rates continue to be low so it is worth considering making the change now to a 30 year fixed.

John O'Hara: If your current rate is about the same as today's rates, I think it is worth refinancing now to ensure against future market changes.

buford: John, I am interested in refinancing my 6.25% 30 fixed to a 5.5% 30 fixed for 1 point is it worth it?

John O'Hara: You should generally expect the pay back (break even) on paying a point is 5 years. If you think you will own your home and have the new mortgage for at least 5 years, then consider paying a point. If not, I would not recommend paying a point.

Bostondotcom: Alright folks, that's all the time we have. Thanks for joining us John!

John O'Hara: Thanks for all your great questions!

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